| Case ID |
fff3660e-167a-41ef-9962-098d5117e5db |
| Body |
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| Case Number |
IT REFERENCE No. 60 OF 1977 |
| Decision Date |
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| Hearing Date |
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| Decision |
The Calcutta High Court held that the impugned sums of interest credited to the suspense account by the assessee were rightly held to be taxable in the assessment year 1970-71. The court emphasized that the concept of real income does not negate the accrual of income where the right to receive the income exists. The court ruled that the mere act of crediting interest to a suspense account did not constitute a change in the method of accounting from mercantile to cash basis. Therefore, the interest amounts of Rs. 8,264 and Rs. 55,920 were assessable on an accrual basis. |
| Summary |
This case involves the assessment of income accrued to James Finlay & Co., a UK company operating in India, for the assessment year 1970-71. The company followed a mercantile system of accounting and had credited certain interest amounts to suspense accounts due to doubts about recovery. The Income Tax Officer (ITO) treated these interest amounts as income on an accrual basis. The Appellate Assistant Commissioner (AAC) and the Tribunal upheld this view, leading to the reference to the Calcutta High Court. The court's decision highlighted the importance of the mercantile system of accounting, where income is assessed on an accrual basis rather than actual receipt. The court also discussed the concept of real income, emphasizing that a mere change in the head of account does not constitute a change in the method of accounting. The court cited several precedents, including CIT v. Confinance Ltd. and others, to support its ruling. Keywords: Income-tax Act, mercantile system of accounting, real income, suspense account, accrual basis, Calcutta High Court. |
| Court |
Calcutta High Court
|
| Entities Involved |
Commissioner of Income Tax,
James Finlay & Co.,
M/s. Bags & Cartons, New Delhi,
Speciality Papers Ltd., Bombay
|
| Judges |
Sabyasachi Mukharji,
Sudhindra Mohan Guha
|
| Lawyers |
Dr. Debi Pal,
Miss M. Seal,
S. Sen,
P. Majumdar
|
| Petitioners |
James Finlay & Co.
|
| Respondents |
Commissioner of Income Tax
|
| Citations |
1982 SLD 1261,
(1982) 137 ITR 698
|
| Other Citations |
CIT v. Confinance Ltd. [1973] 89 ITR 292 (Bom.),
K.R. Kothandaraman v. CIT [1966] 62 ITR 348 (Mad.),
Sarupchand v. CIT [1936] 4 ITR 420 (Bom.),
Poona Electric Supply Co. Ltd. v. CIT [1965] 57 ITR 521 (SC),
H.M. Kashiparekh & Co. Ltd. v. CIT [1960] 39 ITR 706 (Bom.),
Shiv Parkash Janakraj & Co. (P.) Ltd. v. CIT [1978] 112 ITR 872 (Punj. & Har.),
CIT v. Birla Gwalior (P.) Ltd. [1973] 89 ITR 266 (SC),
CIT v. Shoorji Vallabhdas & Co. [1962] 46 ITR 144 (SC),
CIT v. S.K.G. Sugar Ltd. [1974] 96 ITR 194 (Pat.),
Gappumal Kanhaiyalal v. CIT [1979] 117 ITR 78 (All.)
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
Section 5,
Section 145
|